A Conversation with Daniel Kahneman About “Noise”
Engage with the profound insights of Daniel Kahneman, Nobel laureate and author, as he delves into the concept of "Noise". Uncover the intriguing aspects of this often overlooked factor in decision-making and its far-reaching implications in our daily lives.
Noise is the variability of our aggregated judgements
In a biased system, judges might consistently give sentences that are too high for certain types of crimes
- Systems can be both biased and noisy
- Kahneman argues that it’s time we pay more attention to noise
- Reducing noise in a system can help reduce error
The nuances of noise
How we feel after decisions can be really subjective, and we can adapt to our decisions over time.
- For decisions where ultimately the criterion is whether you will like it and it’s simple and relatively small, the evidence suggests that intuitive judgment may be better than analysis.
- Your gut speaks to you when you have a simple story. When everything seems to point in the same direction, giving you a lot of confidence, then there is a good chance that your gut is simplifying the situation.
What noise is and how it differs from bias
In the mathematics of accuracy, there are two types of error: bias and noise.
- Bias is an average error; noise is variability across individuals
- Noise, by definition, is a statistical phenomenon
- When you say that a judgment is noisy, you mean that judgments of this kind are noisy that the statistics indicate variability, indicate noise.
Accounting for and remedying noise
A “noise audit” is a good place to start
- If you have a bunch of interchangeable employees who are performing an interchangeable function, such as different physicians in the E.R. or different federal judges or different underwriters in an insurance company, you can do a noise audit
- The auditors are presented with a problem which is realistic, the kind of problem that they could encounter on their job
- Then, they look at the variability of the case and determine what they expect to happen in that case
- In the case of the insurance underwriters, there was about 10% variability, but there was more like 55%
- When faced with a decision with multiple options, treat options like candidates and try to discipline judgment in various ways
- Decision hygiene is steps an organization can take to improve the quality of the judgment process